Budget 2025 and economic sanctions: Key updates

In its recent budget, the Government of Canada announced it intends to make significant changes to Canada’s financial crimes, trade, and competition regimes, including its economic sanctions laws. This update summarizes the key sanctions amendments proposed in Budget 2025. 

For other budget-related analysis, see our updates covering the budget’s amendments to the Competition Act, as well as its impact on financial institutions more broadly.

Amendments to Canada’s Special Economic Measures Act

Two amendments are proposed to the Special Economic Measures Act (SEMA) – Canada’s primary vehicle for implementing autonomous economic sanctions.

The first amendment would require consultation with the minister of finance on any new sanctions orders or regulations.¹ The aim is to assess broader impacts on the financial sector before imposing new sanctions. This may be welcome news for those concerned that sanctions are creating excessive restrictions on investments and transactions, due largely to Canada’s broad “deemed ownership” rules. However, this additional consultation step will further delay implementation of new autonomous sanctions, while Canada is already perceived as having too many bureaucratic layers that can make its sanctions program slow and cumbersome.

The second amendment would be more consequential. It would permit adopting regulations requiring financial institutions to provide the minister of finance with information about property in their possession or control that is owned, held, or controlled by a sanctioned person, entity, or foreign state, and on any profits generated by that property (i.e., interest on frozen funds). The minister would be able to direct remittance of those profits to the receiver general via a “Targeted Windfall Profit Charge,” to be used to serve public policy objectives.

These amendments would only apply to SEMA, and not Canada’s other sanctions legislation.

Further integration between Canada’s sanctions and anti-money laundering regimes 

These new ministerial powers, including the Targeted Windfall Profit Charge, align with the government’s push to better integrate its financial crimes regimes. They would make it easier to compel financial institutions to provide evidence of potential sanctions offenses and to seize interest earned on frozen funds.

The amendments do not clarify what due process, if any, would precede compelling information or proceeds from financial institutions.

In recent years there have been efforts to address money laundering tied to sanctions evasion. Last year, the government implemented a new “sanctions evasion” reporting requirement under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. 

Expect heightened sanctions enforcement

Historically, Canada has not been as aggressive as its like-minded partners when enforcing sanctions laws. However, there are signs the government intends to take a tougher stance. In May 2025, the RCMP arrested and charged a Canadian businessman for allegedly violating Canada’s sanctions prohibiting technology trade and exports to Russia. More recently, the government indicated it intends to hold Canadian companies accountable that are knowingly participating in sanctions diversion schemes.²

Given the greater integration between Canada’s sanctions and anti money laundering regimes, as well as these new ministerial powers, Canadian businesses and financial institutions must remain vigilant. Thorough due diligence before undertaking transactions is essential to mitigating potential sanctions risks.